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Transportation
Demand-II
CEL 442: Traffic and Transportation Planning
K. Ramachandra Rao
Outline
Transportation Supply
Demand Analysis
Trip Generation:
What generates the trips? Trip productions.
2. Trip Distribution:
For the trips generated, how are they distributed (shared) among the
various destination points?
3. Traffic Assignment
Which routes are taken by the travelers from any origin to any
destination?
Quantity
no. of highway lanes,
rail tracks
Size of runway area,
harbor area, etc.
Capacity of
transportation
facilities
Quality
Traveling comfort, safety,
convenience, etc.
Non-physical systems and
operational features that
increase facility capacity
(ITS initiatives, etc.)
Can help increase the flow of
traffic even when the
physical capacity is constant
4
Transportation Supply
The quantity (or quality) of transportation facilities that
facility producers are willing to provide under a given set
of conditions.
Trip Price
p2
p1
V1
V2
Quantity Supplied
Trip Price
p2
p1
V1
V2
Quantity Supplied
SA
Trip Price
V2
V1
Quantity Supplied
SA
Trip Price
V1
V2
Quantity Supplied
Demand-Supply Equilibration
Facility Supply
Socio-economic Activities
Going to/from work
Going to/from school
Leisure/Entertainment
Visiting restaurants
Transportation
Shopping
Demand
Meetings
Etc.
Demand
Flow
and
Supply
Equilibration
of
Traffic
p*
Quantity (V)
V*
V)
V)
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Trip
Price (p)
VD = 5500 -22p
p = 1.50 + 0.003VS
p*
Demand function
V = 5500 - 22p
Quantity (V)
V*
Supply function
p = 1.50 + 0.0003 V
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Supply Function
price per seat = 200 + 0.02*(no. of airline seats sold per day)
p = 200 + 0.02*q
Demand Function
No. of seats demanded per day = 5000 - 20 (price per seat)
q = 200 + 0.02*p
Solving simultaneously .
Equilibrium price, p* = Rs.214.28
no. of seats demanded and sold at equilibrium, q* = 714
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Demand Function
27.94
mins
Equilibrium conditions:
Travel time = 27.94 mins.
Traffic Volume = 647 vehs/hr
647 veh/hr
Traffic Flow
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Transportation
Shopping
Demand
Meetings
Etc.
Demand
and
Supply
Equilibration
14
Socioeconomic
Activities
Facility Supply
Leisure/Entertainment
Visiting restaurants
Shopping
Transportation
Demand
Meetings
Etc.
Demand
And Supply
Equilibration
Change in Facility Supply
Demand
And Supply
Equilibration
Change in
Transportation
Demand
Demand
And Supply
Equilibration
Change in
Transportation
Demand
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DNEW
DOLD
SNEW
P1
P2
P0
Quantity V
V0
V1
V2
Hence:
Equilibration occurs continually, because of the dynamic nature of
socio-economic activity and transportation decisions.
16
17
Disequilibrium
18
Elasticity of Demand
Definition:
Price
Total trip price
Parking price
Fuel price
Congestion price (price for entering the CBD)
Transit fare, etc.
Travel Time
Trip comfort, safety, convenience, etc.
Original _ demand
Change _ in _ x
Original _ value _ of _ x
V / V
= ( X / V )(V / x )
X / x
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Elasticity of Demand
eV , x = ( X / V )(V / x )
Obviously, the actual expression for eVx will depend on the functional
form of the demand model V as a function of x, as seen in table below
Shape of Demand Function
Linear
V = + X
Product
V = X
Exponential
V = eX
Logistic
V =
1 + e X
Logistic-Product
V =
1 + X
Elasticity Function
(X/V) (V/X)
e=
X
V
1
1 + ( / X )
e=
e = X
X
V
Xe
e = X 1 =
1 + e X
e = 1 =
1 + X
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V=f(x)
Factor or
Attribute, x
V=f(x)
x*
x0
x1
V*=f(x*)
V0
Point Elasticity
dV / V dV x
x*
=
=
= f ' ( x*)
dx / x
dx V
f ( x*)
V1
Quantity of trips
demanded, V
Arc Elasticity
(
V1 Vo )( x1 + x0 ) / 2
=
(x1 xo )(V1 + V0 ) / 2
(
f ( x1 ) f ( xo )(x1 + x0 ) / 2
=
(x1 xo )( f ( x1 ) + f ( x0 ) ) / 2
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Solution:
V / V V p
e
(
V
=
)
=
= (-20)(2)(1.50)(1.50/2000) = - 0.045
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23
Perfectly Inelastic
Perfectly Inversely
Elastic
-1
-
Elastic, Inverse
Perfectly Directly
Elastic
Inelastic
Inelastic
Elastic, Direct
A unit increase in x
results in a very
large decrease in
demand, V
A unit increase in x
results in a very
large increase in
demand, V
A unit increase in x
results in a very small
decrease in demand, V
A unit increase in x
results in a very small
increase in demand, V
A unit increase in x results
in NO change in decrease
in demand, V
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e=
(q1 qo )(p1 + p 0 ) / 2
(p1 p o )(q1 + q0 ) / 2
e=
(1 + .5) / 2 = 0.39
600
Perfectly Inelastic
Perfectly Inversely
Elastic
-1
-
Elastic, Inverse
Perfectly Directly
Elastic
Inelastic
Inelastic
Elastic, Direct
Because the resulting elasticity is less than 1.00, the demand is considered inelastic.
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e=
% change in ridership
% change in price
If e > 1, demand is elastic increase in price will reduce revenue decrease in price will increase revenue
e < 1,
e = 1,
27
Example 1:
The demand for a certain transit system is governed by the power
functional form q = (p)
The agency is considering increasing the transit fare to 70 cents.
If ep = -2.75, q0 = 12,500/day, p0 = Rs.0.50, p1 = Rs.0.70
What policy should be adopted (Should p stay as it is or should be
increased to Rs 0.70)?
Solution
q = (p )
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Solution (continued)
q = p
12,500 = (50 )
2.75
= 5.876 10 8
For p = Rs 0.70, q = 4,955
Loss of ridership = 12,500 4,955 = 7,545
Loss of revenue = 12,500 x 0.5 -4,955 x 0.7 = Rs.3,406 daily.
Clearly, the loss in transit demand due to the price increase will lead to a
very large reduction in revenue that will not be offset by the increase in
transit fare.
So the agency should not increase the transit fare.
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Elasticity of Supply
S / S
= ( X / S )(S / x )
X / x
30
31
Direct Elasticity the effect of change in the price of a good on the demand for
the same good.
Cross Elasticity the effect on the demand for a good due to a change in the
price of another good.
Parking Price
Travel Time
Fuel
Transit Fare
Travel Time
Safety
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Parking Price
Travel Time
Fuel
Transit Fare
Travel Time
Safety
33
Direct Elasticity the effect of change in the price of a good on the demand for the same good.
Parking Price
Travel Time
Fuel
Transit Fare
Travel Time
Safety
34
Direct Elasticity the effect of change in the price of a good on the demand for the same good.
Parking Price
Travel Time
Fuel
Transit Fare
Travel Time
Safety
35
Example 1:
A 15% increase in gasoline price has resulted in a 7% increase in bus
ridership and a 9% decrease in gasoline consumption.
p0 = gasoline price before
p1 = gasoline price after
B0 = Bus ridership before
B1 = Bus ridership after
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Cross Elasticity
p1 = p0 x 1.15
dB 0.07
(1 + 1.07 )
B
= 0.48
e=
=
dp 0.15
(1 + 1.15)
p
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Example 2:
The demand for a certain bus transit system is given by:
q=T
0.3 0.2
0.1 0.25
A I
Where:
q = transit ridership/hr
T = transit travel time (hrs)
p = transit fare (Rs.)
A = cost of car trip (Rs.)
I = average income (Rs.)
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Question (a):
When q0 = 10,000/hr, p = Rs.1. ep = -0.2. What is q1 when p = Rs.0.9?
Also, what is the gain in revenue?
Solution
ep = -0.2
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Question (b). Current car trip cost Rs.3 (including parking). The cross elasticity of transit
demand with respect to car cost is 0.1. If the parking charge were raised by 30 cents, the impact
on transit ridership?
Solution:
car cost cross elasticity = 0.1
30 cents/Rs.3
Ridership increase
1%
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Question (c). Average income of travelers Rs.15,000/yr. Income elasticity is -0.25. What additional
income is necessary to offset the car cost increase?
Solution:
1% increase in income
eI = 0.25 =
dq dI
dI
/
=
.
01
/
q I
I
dq
= 1%
q
dI .01
=
= 0.04 4%
I 0.25
An increase in income of 4% (15,000 x .04 = Rs.600) would cover a 30 cent increase (10% increase) in car
cost. That means a Rs.600 income increase would prevent 100 riders from switching to transit.
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Price
Total trip price
Parking price
Fuel price
Congestion price (price for entering the CBD)
Transit fare, etc.
Travel time
Trip comfort, safety, convenience, etc.
Research has established some values of elasticity
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43
Low
Base
High
Low
Base
High
Road Gasoline
-0.10
-0.15
-0.20
-0.40
-0.60
-0.80
-0.05
-0.10
-0.15
-0.20
-0.40
-0.60
-0.05
-0.10
-0.15
-0.20
-0.30
-0.45
Road Propane
-0.10
-0.15
-0.20
-0.40
-0.60
-0.80
Road CNG
-0.10
-0.15
-0.20
-0.40
-0.60
-0.80
Rail Diesel
-0.05
-0.10
-0.15
-0.15
-0.40
-0.80
Aviation Turbo
-0.05
-0.10
-0.15
-0.20
-0.30
-0.45
Aviation Gasoline
-0.10
-0.15
-0.20
-0.20
-0.30
-0.45
Marine Diesel
-0.02
-0.05
-0.10
-0.20
-0.30
-0.45
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But you like it (or need it) so much that you are even
prepared to pay Rs. 30,000 for it
For all the travelers that demand that trip at equilibrium conditions,
VP*, the total consumer surplus is
= VP* 0.5(q - p) = 0.5 VP* (q - p)
If consumer surplus is large, what does that tell the transit service
provider?
47
Unit Trip
Price, p
Consumer Surplus
Supply Function
p-q
p
Demand
Function
Quantity of Trips demanded, V
0
Vp*
Vp0
48
A change in transportation supply (e.g., increased quantity, increased capacity, increased quality of
service (comfort, safety, convenience, etc.) can lead to a change in the consumer surplus.
Unit
price, p
V1
V2
The change in consumer surplus, which is a measure of the beneficial impact of the
improvement, is given by:
= ( p1 p2 )V1 +
1
( p1 p2 )(V2 V1 )
2
= ( p1 p2 )(V1 + V2 ) / 2 49
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Solution
Existing situation
Fare (Rs.)
1.0
Consumer Surplus
0.4
2000
4000
6000
q (persons/hr)
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Proposed Situation
q2 = 120 buses x 40 seats x 0.95 (load factor)
= 4560 persons/hr
Rev = 4560 x 0.9
= Rs.4140/hr
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Again, consider you go to the mall and you see that flashy
new smart phone
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Unit Trip
Price, p
Supply Function
p*
Demand
Function
Quantity of Trips demanded, V
0
Vp*
VL
Latent demand
References
Demand Analysis
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